Ofcom opens pay TV consultation into Sky Sports

Ofcom has launched a consultation into whether regulation that requires Sky to offer its Sky Sports 1 and 2 channels to other pay TV providers “remains appropriate”.

In 2010, Ofcom imposed an obligation requiring Sky to offer to wholesale Sky Sports 1 and 2 at prices set by Ofcom. This was designed to deliver choice and innovation to consumers through greater competition. The obligation has been in effect since 2010 for Virgin Media (cable) and BT (digital terrestrial TV) while litigation has been ongoing. In November 2014, it was extended to IPTV for BT.

Ofcom said in 2010 that it would review the obligation after three years in light of developments in the market. In April 2014, Ofcom announced it was commencing this review.

There have been significant developments in the market since Ofcom concluded its review in 2010. These include wider availability of sports content on competing retail services, more ‘over-the-top’ content providers and new devices on which consumers can access pay TV. Bundling of pay TV with other communications services is more common.

BT has also acquired key sports rights and entered the market as a ‘vertically integrated’ provider of sports channels and as a pay TV retailer.

Ofcom’s assessment indicates that Premier League and Champions League football are key content likely to be capable of influencing consumers’ choice of pay TV retailer. Therefore, Ofcom is consulting on its view that limited distribution of this content may harm competition between pay TV retailers.

Sky currently holds over 75 per cent of live rights to Premier League football and has more than 80 per cent of market revenues from the supply of key sports channels.

The content Sky has is likely to influence the purchasing decisions of a sizeable proportion of high-value customers. Retailers that do not have access to this content would find it more difficult to compete for these customers.

Given Sky’s continued strong market position, Ofcom is seeking views on its assessment that if there was limited distribution by Sky of its key sports content, competition between pay TV retailers may be harmed. Ofcom is also seeking views on whether, given its market position, Sky may have incentives to limit distribution of its key sports content.

BT holds around 25 per cent of live Premier League rights, generating between 10 per cent and 20 per cent of revenues, but has acquired all live rights to Champions League football from next season. BT may also have incentives to limit distribution of its key sports content. But given the amount of content rights it currently holds and its market position, it is less clear that limiting distribution of its sports channels would harm competition. Ofcom is seeking views on this assessment.

Ofcom recognises that the pay TV sector is evolving rapidly and any assessment is affected by continuing developments in the market.

In assessing whether regulation remains appropriate or whether it should be removed, Ofcom will take account of such developments, including the outcome of the next Premier League auction.

Ofcom will consider responses to its consultation and any further steps will be outlined in a second phase of the review in 2015.